Life Perspectives, Spring 2020

New PBR Practice Note Released

The Life Valuation Committee’s Principle-Based Reserve Review (PBR) Procedures Work Group released a public policy practice note in mid-April, Common Practices of Examining Actuaries Involved in Statutory Financial Solvency Examinations of Life and Health Insurers, Including Considerations for PBR.

The document is intended primarily to assist examining actuaries in coordinating with examiners in charge and in effectively conducting risk-focused examinations. The approach is based on an examining actuary being an integral member of the examination team.

The practice note “will help examining actuaries bring more value to the risk-focused examination approach and be more integrated in the risk identification, risk assessment, and risk mitigation aspects of the financial examination process,” said work group Chairperson Randall Stevenson. “There is so much more to a risk-focused examination than validating the correctness of reserves. It is more about the processes used to ensure the reserves are and will continue to be correct. As an analogy, a broken clock is right twice a day, instead of verifying it has the correct time when checked, the risk-focused approach is intended to make sure it is running properly.

“The practice note is not only for examining actuaries, but for actuaries whose work is subject to statutory examinations. It is intended to provide them with an idea of how to better prepare for an examination, respond to requests for information, and understand what examiners are likely to ask—and why,” Stevenson said.

“The work group was comprised of nearly equal representations of actuaries employed as regulators, consulting actuaries who perform examinations for regulators, and actuaries whose work is subject to examination,” he said. “This blended representation was intended to help produce a practice note understandable by and beneficial to all of the actuaries who are stakeholders in financial examinations.”

PBR Practice Note Updated

The Life Principle-Based Approach Practice Note Work Group updated the practice note, Life Principle-Based Reserves (PBR) Under VM-20, previously released in 2017, to reflect emerging practices and changes to the Valuation Manual since the version effective for Dec. 31, 2019, valuations.

Task Force Comments on ASOP No. 11 Exposure Draft; ASB Extends Comment Deadline

The Actuarial Standards Board (ASB) has extended the comment deadline for the exposure draft of Actuarial Standard of Practice (ASOP) No. 11, Reinsurance Involving Life Insurance, Annuities, or Health Benefit Plans in Financial Reports.

The Life Practice Council formed a task force to review the exposure draft that in mid-April sent a comment letter to the ASB on the exposure draft. The letter addresses issues including whether the scope description relating to the inclusion of self-insurance was clear; whether the guidance is sufficient given current laws, regulations, and accounting rules; whether there were any areas where the guidance is inconsistent with current practice; whether there are areas where the guidance creates issues with reinsurance regulatory requirements; and whether there are areas where the guidance creates conflict or introduces ambiguity with reinsurance-related guidance in other ASOPs.

The ASB’s comment extension is due to the coronavirus pandemic and its worldwide impact on normal business operations, which may have impeded individuals or organizations from submitting comments. The ASB received requests to extend the deadlines from several committees and task forces of the Life Practice Council, as well as the Pension Practice Council for a separate ASOP comment deadline extension. The new comment deadline for ASOP No. 11 is June 30. The ASB exposure draft can be viewed here.

Capitol Forum Cross-Practice Webinar Will Cover COVID-19 Issues

The Academy will host a cross-practice webinar on April 28, covering the COVID-19 pandemic. To be moderated by Academy President D. Joeff Williams, the Capitol Forum webinar will feature the Academy’s practice-area senior fellows, including Senior Life Fellow Nancy Bennett. The webinar will be held from noon to 1:30 p.m. EDT, and continuing education credit will be available. Register today.

NAIC Releases RBC Calculations Guidance

The National Association of Insurance Commissioners (NAIC) has released guidance for 2020 Life Risk-Based Capital calculations for debt restructuring and has released proposed modifications for the methodology used in reporting losses.

The NAIC Financial Condition (E) Committee released guidance to U.S. insurers in an effort to encourage them to work with borrowers who are unable to or may become unable to meet their contractual payment obligations because of the effects of COVID-19. The guidance applies to a troubled debt restructuring issued as a result of COVID-19 and is applicable to the term of the loan modification, but solely with respect to a modification, including a forbearance arrangement, an interest rate modification, a repayment plan, and any other similar arrangement that defers or delays the payment of principal or interest, which occurs during the applicable reporting period for a loan that was not more than 30 days past due as of Dec. 31, 2019.

Public Policy Outreach

Principle-Based Reserve (PBR) Analysis Templates Task Force member Rachel Hochberg and Academy member Shari Brockett were among three sets of Academy presenters at the Feb. 25 meeting of the Actuaries Club of Philadelphia. They presented a “PBR Assumptions Resource Manual Introduction,” discussing how the manual published in January 2019 provides a potential framework for updating valuation assumptions and walking through a term lapse margin case study.

Annual Meeting to Feature Historian Michael Beschloss, Political Analyst Charlie Cook

Registration is open for the Academy’s scheduled 2020 Annual Meeting and Public Policy Forum, which will feature two highly respected speakers who will weigh in on this year’s national election, just days after it occurs.

Beschloss

Cook

Noted presidential historian Michael Beschloss will be the keynote speaker. He will provide attendees with context and insights on the presidency and the presidents who have held the office—including the winner of the 2020 election, to be held just two days preceding the Annual Meeting. Charlie Cook, a highly respected impartial analyst of trends in American politics and elections, will break down the political reality of how the historic election played out, including an analysis of the congressional makeup.

The Annual Meeting and Public Policy Forum will be held Nov. 5–6 at the Fairmont Hotel in Washington, D.C. Continuing education credit will be available. Discounted early registration rates are now available—register today.

Registration Open for LHQ Seminar

Registration is open for the Academy’s 2020 Life and Health Qualifications Seminar. This annual seminar sells out every year because it delivers the highest-quality and most efficient way to obtain needed basic education or relevant continuing education (CE) credit necessary to qualify to issue actuarial opinions for either the NAIC Life and Accident & Health (A&H) Annual Statement or the NAIC Health Annual Statement. The seminar is scheduled for Nov. 9–12 at the suburban Washington, D.C., Crystal Gateway Marriott in Arlington, Va. (new location for this year). Register now and save—discounted registration rates are now available.